Treasuries climbed, pushing yields lower after the biggest advance in four months spurred by comments from Federal Reserve Chair Janet Yellen that signaled interest rates may rise by the middle of next year.
The difference between yields on the two-year note and the 30-year bond narrowed to the least in eight months today as the short-term notes held yesterday’s drop. The spread to Japanese two-year notes reached the widest since September. The Treasury will auction $13 billion 10-year inflation-adjusted notes today, a decrease of $2 billion from the last sale.
“After a big move, there tends to be some retracement,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “If the U.S. economic data continues to improve — and expectations are that the Fed will look to raise interest rates in the first half of 2015 — it’s going to be supportive of higher yields.”
The benchmark 10-year note yield fell three basis points to 2.74 percent as of 6:50 a.m. in London following a 10 basis point advance yesterday, according to Bloomberg Bond Trader prices. The 2.75 percent note due in February 2024 rose 1/4, or $2.50 per $1,000 face amount, to 100 1/32. The yield spread over Group-of-Seven peers was 0.62 percentage points yesterday, the most since April 2010.
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